Global IT spending to drop this year, but to rise in Middle East

Worldwide IT spending is forecast to drop 3.8 per cent this year to $3.2 trillion (Dh11.7trn) from last year's $3.8trn, according to industry tracker Gartner.

However, there has been a marginal increase in IT spending in the Middle East and Africa, which has risen from $207.8bn in 2008 to $213.5bn in 2009. The region was followed by Japan, which showed an increase from $291.7bn to $294.5bn.

"IT organisations worldwide are being asked to trim budgets, and consumers are cutting back on discretionary spending," said Richard Gordon, research vice president, and head of global forecasting at IT research firm Gartner. "The speed and severity of the response by businesses and consumers alike to these economic circumstances will result in an IT market slowdown in 2009 that will be worse than the 2.1 per cent decline in IT spending in 2001 when the internet investment bubble burst."

In a broadbased slowdown, the forecasts for all four of the key market sectors of hardware, software, IT services and telecommunications have been revised downward, with only software spending growth remaining positive.

Software spending has grown from $221.9bn to $222.6bn and increase of 0.3 per cent from 2008.

Although government stimulus packages will likely be important in the long term, they will not be able to offset this bleak near-term outlook. Until global financial markets stabilise, global GDP growth, including IT spending, is unlikely to strengthen.

As a result the slowdown in IT spending will reduce new market penetration and will slow replacement activity. The impact of reduced new sales will be more strongly felt in emerging markets, while the impact of reduced replacement activity will be more strongly felt in mature markets. Consumers and businesses will continue switching to lower-cost products, extending the life of existing devices and extending their current contracts and purchasing agreements.

However, IT is essential to running most businesses. Supporting current complex IT installations is both necessary for continued operations and a strategy for slowing down technology refresh cycles.

"IT vendors should plan for business and consumer spending to be curtailed during 2009 and for a slow, prolonged recovery during 2010," said Gordon. "At the same time, they should be alert to opportunities to help buyers with cutting costs, complying with new government regulations and taking best advantage of government rescue plans."

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